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The American Antitrust Institute is an independent, nonprofit organization devoted to promoting competition that protects consumers, businesses, and society. We serve the public through research, education, and advocacy on the benefits of competition and the use of antitrust enforcement as a vital component of national and international competition policy.

The American Antitrust Institute (AAI) filed an amicus brief asking the U.S. Supreme Court to deny “public entities” a special right to an immediate, automatic appeal whenever they lose a motion claiming they are exempt from Sherman Act liability under the state-action doctrine. AAI argues that allowing an automatic appeal would significantly burden antitrust plaintiffs and the judicial system and is not warranted under the law.

AAI Commentary by Bert Foer on Chicken Processors: A Chicken Nugget for the Antitrust Division

The U.S. Department of Justice finds itself in a bit of a rumpus in Virginia. I hope they don’t chicken out. The story begins with the only three chicken processors in the Shenandoah Valley: Tyson, George’s, and Pilgrim’s Pride. The Tyson’s plant was not doing well and Tyson decided to exit the market. What to do with its processing plant? It could close it or try to sell it. Tyson entered into negotiations with George’s , a sale to whom would give George’s 43% of the market .

The sale would be too small for the Pre-Merger Notification Act to require reporting to the antitrust agencies and holding off consummation until a review had been completed; but when the DOJ got wind of the deal, the Antitrust Division issued a civil investigative demand for information that would help them to evaluate whether this 3-to-2 acquisition would be anticompetitive. The requested information was not forthcoming and while conversations were going on with DOJ, George’s and Tyson pre-emptively entered into the agreement. This was on May 7. Three days later, the DOJ filed its complaint to stop the deal.

It is not nice to be in negotiation with the U.S. government and to suddenly and without notice complete a deal that you know is being investigated. Further, an acquisition that reduces what is already a highly concentrated market from a triopoly to a duopoly is something that is automatically questionable. One would expect a challenge, unless cooperation by the parties produced information that would overcome the presumption of anticompetitive effects. Of course DOJ sued.

What happened next was a flurry of political activity. Workers at the Tyson plant feared that they would be out of a job if their plant closed and so saw George’s as a kindly Colonel Sanders to the rescue. Suddenly the politicians were all over the case. Virginia’s Governor, two Senators, and a Representative were writing to the Attorney General, asking that the suit be withdrawn. Sound bytes of various sorts castigated the DOJ.

It should be obvious that the DOJ’s purpose is not to put anyone out of a job. Nor is there any question that Tyson has the right to make the unilateral decision to exit a market. The sole question is whether there are less anticompetitive alternatives to George’s, such as, for example, a growers’ coop capable of buying and operating the plant. This question needs to be answered fairly quickly.

The reason the question is important is that the growers and consumers are also stakeholders in this deal. Poultry growers in today’s economy have few rights and fewer options. If they are mistreated by one processor, they can, at least in theory and with great difficulty, contract with a different one. If they have only one alternative, their options have been cut in half and they are all that much more serfs on the land. The remaining processors have that much more leverage in setting contract prices and terms for the growers.

The consumer interest is a bit more remote, since additional profits that the processors are able to garner by pushing down the price they pay for chickens will probably not be passed on at the supermarket. But consumers do have very real interests both in an economic system where the factors of production are based on prices that reflect actual costs rather than naked power and in the independent enforcement of the antitrust laws. DOJ should work efficiently to determine whether there is an alternative to George, but the agency should not bow to an impudent chicken king or to political pressure.